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LT #11 - Top Links - March 2023
Collapse of Silicon Valley Bank, Credit Suisse, Signature Bank, and the bailout by the FDIC + Fed, monopolies, growing single families home, what causes homelessness, and western ideas in Afghanistan
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Financial Markets Roiled
In case you had your head stuck in the ground, the global economy almost collapsed this past month due to… yes… irresponsible banking practices and the risk of contagion. The FDIC and Federal Reserve, among many other players, responded aggressively - averting a meltdown unlike in 2008 - but it remains unclear what unforeseen consequences and unfair outcomes this process will have resulted in.
What did they do wrong? In short: they bet the Fed would never raise interest rates. But there’s more…
On Wednesday March 8, Moody’s still had an A3 rating on SVB Financial, owner of the now defunct Silicon Valley Bank, as it was already collapsing for all to see. Four notches into investment grade – a very respectable rating!
In the evening of that day, after SVB disclosed a $1.8 billion loss on the sale of bonds, a planned capital raise, and a slew of liquidity measures, Moody’s downgraded it by just one itty-bitty notch, to Baa1, still three notches into investment grade.
Then on March 10, after Silicon Valley Bank was shut down and put into receivership, Moody’s downgraded SVB by 13 notches in one fell-swoop, all the way across junk territory, to its lowest rating, to C, which is Moody’s rating for default.
This is a repeat of the irresponsible behavior of credit-rating agencies leading up to the 2008 financial crisis. The misaligned incentives still haven’t been fixed.
What happened next?
And then another bank run… this time in Switzerland… and with a serious risk of global contagion. We don’t know who bailed out Credit Suisse… but it was probably the US Federal Reserve
So how do we avoid all this in the future? Maybe it’s time to Fire the Fed
Key bad guys in the Silicon Valley Bank saga are at the Federal Reserve. It's time to end the era of central bank supremacy and fire the Fed as our most important bank regulator.
Monopolies, oligopolies, and their consequences
Bad Faith podcast with Matt Stoller: Planes, trains, and bank bailouts
And further… Monopologies behind the Adderall shortage and how the botched federal crackdown post opioid crisis:
What distinguishes Cardinal, AmerisourceBergen, and McKesson is not their ability to distribute medicine… that they have *market power* and can block rival distributors who don’t engage in illicit drug dealing from getting into the market. The goal of the opioid settlement shouldn’t have just been to disgorge profits and give these firms compliance homework, it should have been to displace these bad actors entirely from the market and let non-corrupt wholesalers take their market share…
The new harsh rules and the failure to restructure the industry, fostered, in part, the Adderall shortage, because of how the settlement itself works… if the pharmacist is trying to get people medicine in good faith, keep selling… instead of doing due diligence, they arbitrarily cut off pharmacies who increase the amount of controlled substance they dispense.
Great Deep Dives
Benjamin Studebaker: The function of Marianne Williamson’s candidacy (spoiler… very little)
Hannah Ritchie at Sustainability by the Numbers: China uses as much cement in two years as the US did over the entire 20th century
David Oks with Palladium Magazine: The West Lives on in the Taliban’s Afghanistan
I saw it, above all else, in many local Afghans whom I met and befriended. These were not Western liberals: they had friends among the Taliban, and were quick to defend regime decisions I found abhorrent, like the destruction of the Bamiyan Buddhas. But these subjects of the Islamic Emirate could not be kept from watching Stranger Things or Game of Thrones or Japanese anime; they had a better knowledge of Breaking Bad than I did. On Twitter—they, like so many Afghans, were avid users—shared soyjack memes and called themselves “sigma males.” They talked about feminism, “LGBTQ,” and pronouns—strange things to complain about in a country where women can’t go to school. They were becoming Westerners: culture war, America’s most successful soft-power export, was their induction. The younger members of the Taliban, online enough to follow Andrew Tate, were not immune…
What was it like, I asked, to make the transition from mujahid to bureaucrat? The one who spoke the best English—he had given himself the moniker “Mr. Young”—responded quickly. “Very boring,”… Hearing his words, it was hard not to feel the sense that something had passed away. It was like listening to a cowboy reminiscence about the closing of the frontier… Soon my tea with the mujahideen was over. The suicide bombers walked me to their car, offered me their WhatsApp contact information, and thanked me dearly for coming to Afghanistan. Mr. Young turned to me. “If you ever want to stay with us, then you are always welcome.”
Is AI different?
Child Rearing is Changing
Noah Smith - Honestly, it’s probably the phones - on growing rates of mental health issues and suicide
Nathan Yau at Flowing Data built some great visualizations illustrating the changing shape of the American family:
Housing shortages cause homelessness
Aaron Carr argues in Noahpinion that it’s primarily not 1) mental health issues 2) drug abuse 3) poverty 4) weather 5) progressive policies - but instead just housing shortages.
Thanks for reading! See you next month! - Yoshi